Markets take a February pause after spectacular January rally
Most North American crude benchmarks, including WTI and Canadian Light, declined about 5%. Western Canadian Select (WCS) fell 6%, while Brent dipped a more modest 1% for the week. Oil prices remain stuck in a very narrow trading range since mid-January.
Henry Hub natural gas prices slid another 5% this week, ending the week at US$2.58/MMBtu, and touching a 1-year low. AECO gained 9% for the week, ending Friday at US$1.46/MMBtu.
Heating oil prices were roughly unchanged while wholesale gasoline prices rose 0.7%.
This week's Canadian economic data:
- Canada added 66,800 jobs in January, led by gains in Ontario and Quebec. The private sector added 111,500 new jobs, while the number of self-employed declined by 60,700. Alberta's employment rate fell for the second month in a row, raising the provincial unemployment rate to 6.8%. The national unemployment rate increased by from 5.6 to 5.8%, due to an increase in the labour participation.
- Despite the stellar jobs report, yields on Canadian 10-year notes closed at 1.88, down 8 basis points from the previous week. The loonie also sank 1.4%.
This week's US economic data:
- After widening for five straight months, the US trade deficit shrank over 11% to US$49.3 billion. Imports declined by 2.9%, mainly due to petroleum products.
- The Trump Administration warned that there remains a "pretty sizeable distance" between the US and China, suggesting a trade agreement may not be reached before the March 1 deadline. US tariffs on US$250 billion worth of Chinese imports currently sit at 10%, but could rise to as much as 25% if no agreement is reached.
- US bond yields declined across the board this week, with the near-end of the curve remaining inverted. Yields on 10-year bonds declined 7 basis points to 2.63%.
- Despite lower yields, the greenback gained 1.2%, returning to the highs of late last year.
Elsewhere in the world:
- The European Commission cut its Eurozone growth forecast from 1.9% to just 1.3% for 2019. The Euro declined almost 1%. Yields on German 10-year bunds were cut in half to just 0.09%.
- The Bank of England also warned of weak economic growth, opting to keep interest rates unchanged this week. The UK economy is now expected to expand 1.2% this year, down from a previous forecast of 1.7%, the lowest growth rate since 2009. The pound sterling declined 1.4% for the week.
- Australia's central bank hinted it may need to reduce rates due to a weakening economy. The Australian dollar and New Zealand kiwi fell over 2% this week.
A mixed bag in equity markets this week, with emerging markets and European markets mostly posting losses, while US indices were flat to slightly positive. The German DAX and Japan's Nikkei were the worst performing developed markets, declining over 2%.
The Dow Jones Industrial gained 0.2%, while the S&P 500 was roughly unchanged. Utilities were the best performers south of the border, as traders turned defensive this week. Energy and materials were the worst performing sectors, due to falling commodity prices.
The TSX gained almost 1%. Energy was also the worst performing sector, falling over 2%.
Losses were seen across all subsectors. Producers were hit hard this week, particularly Encana (-10.1%) and Anadarko Petroleum (-13.6%). Midstream stocks were the least scathed due to lower bond yields.
|Suncor Energy||SU||42.81||▲1.0||35.53||55.47||D W|
|Imperial Oil||IMO||35.49||▼-0.1||33.43||44.91||D W|
|Husky Energy||HSE||14.95||▼-4.4||13.33||22.99||D W|
|Pembina Pipeline||PPL||47.09||▲0.4||37.60||47.84||D W|
|Inter Pipeline||IPL||20.93||▲0.2||18.60||25.66||D W|
|Gibson Energy||GEI||19.60||▼-3.2||15.68||23.32||D W|
|LARGE CAP E&P|
|Cdn Natural Res||CNQ||34.14||▼-2.5||30.11||49.08||D W|
|Cenovus Energy||CVE||9.93||▼-1.3||8.74||14.84||D W|
|Vermilion Energy||VET||31.14||▼-2.6||26.67||49.67||D W|
|Pason Systems||PSI||19.60||▼-4.3||16.05||24.57||D W|
|Mullen Group||MTL||11.51||▼-4.8||11.26||16.93||D W|
|Secure Energy||SES||7.71||▼-4.2||6.25||8.91||D W|
|REFINING & MARKETING|
|Parkland Fuel||PKI||37.18||▼-0.3||27.36||47.45||D W|
|Exxon Mobil||XOM||73.98||▼-2.6||64.65||87.36||D W|
|Kinder Morgan||KMI||18.02||▼-1.8||14.62||18.67||D W|
|Williams Co||WMB||26.88||▼-2.0||20.36||32.22||D W|
|LARGE CAP E&P|
|EOG Resources||EOG||92.50||▼-6.4||82.04||133.53||D W|
|Occidental Petro||OXY||64.96||▼-4.5||56.83||87.67||D W|
|Anadarko Petro||APC||41.84||▼-13.6||40.40||76.70||D W|
|Pioneer Natural Res||PXD||135.71||▼-5.1||119.08||213.40||D W|
|Baker Hughes||BHGE||24.61||▲1.1||20.09||37.76||D W|
|Ntl-Oilwell Varco||NOV||28.35||▼-5.2||24.27||49.08||D W|
|Marathon Petro||MPC||62.72||▼-4.2||54.29||88.45||D W|
|Phillips 66||PSX||93.52||▼-0.7||78.44||123.97||D W|
|Valero Energy||VLO||84.14||▼-1.3||68.81||126.98||D W|
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